I. Definition of Limited Company LC Under Turkish Law
Limited Company is a trading company that was included in our law in 1926. It is regulated between articles 573 and 644 of the Turkish Commercial Code. A limited company is a company established by one or more real or legal persons under a trade name, which authorized capital is determined and this capital consists of the sum authorized capital shares. It is a capital company, but it is based on the mutual trust of the partners.
In the second paragraph of Article 573 of the Turkish Commercial Code; “The partners are not responsible for the debts of the company, they are only obliged to pay the declared capital shares they have committed and to fulfill the additional payment and ancillary performance obligations stipulated in the company agreement.” The legal entity is responsible for its debts.
Although it is a capital company with personal elements, it requires little and common capital. It has a simple management style.
II. Elements of Limited Company
The founding elements of the limited company; partners, purpose and subject, capital, limited liability, trade name and legal entity. It is established depending on these six elements.
A limited company is established by one or more natural or legal persons. In order to gain the title of partner, it is necessary to have at least one declared capital share. The title of partnership can be acquired originally and by transfer. An unincorporated ordinary partnership cannot be the founder or partner of a limited company. The number of partners in a limited company can be between one and fifty. If the number of partners exceeds fifty, it must be transformed into a joint stock company. It can be established with many partners and then become a single partner.
In Article 574 of the Turkish Commercial Code; “The number of partners cannot exceed fifty. If the number of partners drops to one, the situation is notified in writing to the managers within seven days from the date of the transaction that resulted in this result. From the date of receipt of the notification until the end of the seventh day, the directors must register and announce that the company is a sole proprietorship, the name, place of residence and citizenship of this partner, otherwise they will be liable for the resulting damage. The same obligation applies where the company is established with a partner. The company cannot acquire the declared capital share in such a way that it will transform into a company whose sole partner will be itself.”
Limited partnership in which all shares without any partner belong to the partnership is prohibited. If the declared capital share is acquired by the partnership in violation of this prohibition, the registration will automatically become null and void. The cancellation process to be made by the trade registry officer will be explanatory.
B) Purpose and Subject
In the third paragraph of Article 573 of the Turkish Commercial Code; “A limited company can be established for any economic purpose and subject that is not prohibited by law.” However, it is legally forbidden for limited companies to engage in economic activities such as banking, insurance, financing and factoring, financial leasing, investment partnerships. In addition, a limited company cannot be established to carry out social assistance, education and scientific activities. The subject of operation of the company should be shown in the articles of association. The subject, the purpose of the company and its economic activities should not be contrary to public order and morality, and should not be impossible.
C) Trade Name
A limited company is considered a merchant. In the first paragraph of Article 18 of the Turkish Commercial Code; “The merchant is subject to bankruptcy for all his debts; It is also obliged to choose a trade name in accordance with the law, to register its commercial enterprise with the trade registry and to keep the necessary commercial books in accordance with the provisions of this Law.” For this reason, limited companies must also choose and register a trade name. This trade name must also be included in the articles of association of the company in accordance with Article 576 of the Turkish Commercial Code.
The trade name of the limited company must include the subject of activity and the limited company. If there is more than one subject of activity, it is sufficient to have one of them. If the name and surname of a real person is desired to be written on the title, the term limited company should be used without abbreviation.
In Article 580 of the Turkish Commercial Code; “The declared capital of the limited company LLC is at least ten thousand Turkish Liras. The minimum amount written in this article can be increased up to ten times by the President.” The declared capital must be determined as an amount over ten thousand Turkish Liras and this amount must be written in the company contract. The declared capital share of the partners is determined according to their contribution to the capital.
In Article 127 of the Turkish Commercial Code; “Unless there is a contrary provision in the law, as capital to commercial companies;
- a) Money, receivables, valuable papers and shares of capital companies,
- b) Intellectual property rights,
- c) Movables and all kinds of immovables,
- d) Utilization and usage rights of movable and immovables,
- e) Personal labor,
- f) Commercial reputation,
- g) Commercial enterprises,
- h) Rightly used transferable electronic media, fields, values such as names and signs,
- i) Mining licenses and other rights with economic value,
- j) Any value that is transferable and can be evaluated in cash.”
Values listed here may be subject to the capital of the limited company. Acts of service, personal labor, commercial reputation and undue receivables cannot be brought to the limited company as capital. In addition, in Article 581 of the Turkish Commercial Code; “There is no limited real right, lien or measure on them; Elements of assets, including intellectual property rights and virtual environments and names, which can be evaluated and transferred in cash, can be put as capital in kind. Acts of service, personal labor, commercial reputation and undue receivables cannot be capital.” Capital can be brought in real or in cash.
E) Limited Company
In article 602 of the Turkish Commercial Code; “The company is only liable with its assets due to its debts and liabilities.” The partners are responsible for the amount of capital they have committed to the company. The partners are obliged to pay the capital debt, to fulfill the additional payment and side performance obligations stipulated in the articles of association. Partners have no personal to creditors. Shareholders may be liable only for public debts. If the public debt cannot be collected from the legal representatives of the company, the partners will be liable.
F) Legal Personality
Limited company has legal personality. The establishment of the company among the partners is stated in Article 585 of the Turkish Commercial Code; “The company is established when the founders declare their will to establish a limited company in the company contract signed in the presence of the authorized personnel in the trade registry directorate, which is regulated in accordance with the law, to which they unconditionally undertake to pay the entire capital.” However, the acquisition of legal personality is stated in the first paragraph of Article 588 of the Turkish Commercial Code; “The company acquires legal personality upon registration in the trade registry.”
III. Differences with The Joint Stock Company
Limited companies are preferred more due to the fact that the establishment and operation of the limited company is simpler than that of joint stock companies and the limited principle is adopted in limited companies.
Although there is no limit to the number of partners in joint stock companies, there can be a maximum of 50 partners in limited companies.
Bearer papers cannot be issued in limited companies, as in joint stock companies. They can only issue registered paper. Even if a registered paper is issued, the transfer of the share depends on the permission of the company.
In limited companies, the transfer of the declared capital share must be made in writing and the signatures of the parties must be notarized. There is no need for this in a joint stock company. Because they can transfer shares with bearer papers. While a limited company can be established with a capital of ten thousand Turkish Liras, a capital of fifty thousand Turkish Liras are required for the establishment of a joint stock company.
Shareholders of a joint stock company cannot be held liable for public debts. A joint stock company can go public, but a limited company is prohibited. In joint stock companies, there is an obligation to deposit the capital amount to be put into the bank before registration and to block
this deposit, while there is no such obligation in a limited company.
Joint stock companies with a capital of more than 250,000 Turkish Liras are required to have a lawyer, while a limited company does not have such an obligation. A joint stock company is managed by the board of directors, but a limited company is managed by directors.
IV. Establishment of Limited Company
There are three stages to the establishment of a limited company. First, the company contract must be drawn up. Then, notary approval must be obtained and registered and announced in the trade registry. The moment of establishment and the moment of acquisition of the legal personality are separate from each other.
A) Limited Company Agreement
In order to demonstrate their will to establish a limited company, the founders prepare a company contract with the content and scope stipulated by the law in terms of the operation of the company. The company contract to be prepared should completely include the mandatory records specified in the law, rights or goods other than the cash that is committed to be brought as capital, the business or assets taken over by the company, or if it is considered to provide a special benefit to the founders from the company’s earnings. However, if there are other terms and conditions that they want to be binding, the founders can add them to the articles of association.
Article 575 of the Turkish Commercial Code states how the contract should be made. According to the article; “The company contract must be made in writing and signed by the founders in the presence of authorized personnel in the trade registry directorate.” The contract must be in writing, signed by the founders in the presence of authorized personnel in the trade registry directorate, and must contain mandatory records.
There are mandatory elements that must be included in the company contract. These mandatory records are stated in article 576 of the Turkish Commercial Code; “The following records must be clearly stated in the company agreement:
- a) The company’s trade name and place of headquarters.
- b) Business subject of the company, with its essential points specified and defined.
- c) Nominal amount of declared capital, number of declared capital shares, nominal values, privileges, if any, groups of declared capital shares.
- d) Names, surnames, titles, citizenships of the directors.
- e) The form of announcements to be made by the company.” If even one of these mandatory elements is not included in the articles of association, the trade registry manager does not register the agreement with the trade registry.
The binding records, if stipulated in the articles of association, are in Article 577 of the Turkish Commercial Code; “The following entries are binding provisions if they are stipulated in the articles of association:
- a) Regulations deviating from the legal provisions regarding the limitation of the transfer of declared capital shares.
- b) Granting the shareholders or the company the right to be offered, pre-emptive, repurchase and purchase rights regarding the declared capital shares.
- c) Anticipation of additional payment obligations, their form and scope.
- d) Forecasting ancillary performance obligations, their form and scope.
- e) Provisions granting veto right to certain or identifiable partners or superior voting right to some partners in case the votes are equal as a result of voting on a general assembly resolution.
- f) The provisions of the contract penalty that can be applied in case the obligations stipulated in the law or the articles of association are not fulfilled at all or on time.
- g) Provisions regarding the prohibition of competition, which are separated from the legal regulation.
- h) Provisions giving special right to call the general assembly to the meeting.
- ı) Provisions deviating from the legal regulation regarding decision making, voting rights and calculation of voting rights in the General Assembly.
- i) Authorization provisions regarding the transfer of company management to a third party.
- j) Provisions deviating from the law on the use of balance sheet profit.
- k) Recognition of the right to quit and the conditions for its use, the type and amount of the withdrawal fund to be paid in such cases.
- l) Provisions showing the special reasons for the partner’s dismissal from the company.
- m) Provisions regarding the reasons for termination other than those specified in the law.”
These provisions are valid only if they are subject to the contract. Even if the partners decide unanimously or all the relevant parties give their consent, if they are not included in the articles of association, it cannot be said that it has been decided as valid. If these provisions are included in the contract, the partners can file a lawsuit for the annulment of the general assembly resolution in case of contradiction.
In Article 579 of the Turkish Commercial Code; “The company agreement can deviate from the provisions of this Law regarding limited companies only if this is expressly permitted by the law. Complementary articles of association, which are permitted by other laws to be enacted, become specific to that law.” The records and elements that can be arranged within the scope of the limited company agreement; Mandatory records, binding records if included in the articles of association, and optional records expressly permitted by the mandatory provisions regarding limited companies in the Turkish Commercial Code. No other record may be included in the contract.
B) Notary Approval and Registration
The company agreement signed by the founders must be notarized. It is the accuracy of the signatures, not the contract itself that the notary approves. With the notary approval, the limited company is established. However, it passes as a front company until the registration stage. It has not yet acquired its legal personality. For the transactions made before the registration of the company, in the third and fourth paragraphs of Article 588 of the Turkish Commercial Code; “Those who act on behalf of the company before registration are personally and severally liable for these transactions. Provided that such commitments are clearly stated that they are made on behalf of the company to be established in the future and they are accepted by the company within three months following the registration of the company in the trade registry, only the company will be responsible for them.” In order for the transaction to be counted, the company must accept it within 3 months.
In article 585 of the Turkish Commercial Code; “However, the condition that at least twenty-five percent of the nominal value of the shares committed in cash is paid before registration does not apply to limited companies. The provisions of the first paragraph of Article 588 are reserved.” There is no need for the share prices to be paid before the registration. If all or part of the company’s capital is committed in cash, all of the subscribed shares must be paid within twenty-four months following the registration of the company. If capital in real is in question, the supplementary process of the capital commitment in kind, annotation on the title deed for the immovables, the special registry of the capital commitment in kind in the assets registered in the special registry, the capital in real is not accepted unless the complementary stage is realized, since the movables are deposited to the safe person. After the complementary transaction, capital in real can be considered to have been brought.
In article 586 of the Turkish Commercial Code; “After the company contract is drawn up as stipulated in Article 575, an application is made to the trade registry where the company headquarters is located. The application is signed by all directors. The following documents are attached to the application:
- a) A certified copy of the articles of association
- c) A document showing the persons authorized to represent the company and the selection of the auditor, showing their places of residence. The following records are included in the petition:
- a) Names and surnames or titles, place of residence, citizenship of all partners.
- b) The basic capital share undertaken by each partner and the total amount paid.
- c) Names and surnames or titles of directors, whether they are partners or third parties.
- d) How the company will be represented.”
It is stated that which documents should be submitted for registration.
Then, if everything is complete and there is no problem with the contract or documents; When the application is accepted, in Article 587 of the Turkish Commercial Code; “The entire company contract is registered in the trade registry of the place where the company’s headquarters is located and announced in the Turkish Trade Registry Gazette, within thirty days following the signing of the signatures of the founders in the presence of authorized personnel at the trade registry directorate.” Thus, a limited company is not only established, but also acquires legal personality.
V. Bodies of the Limited Company
The two mandatory bodies of the limited company are the general assembly and the manager or managers. There is no mandatory statutory body for inspection. Company audit is performed by externally selected independent audit firms or by independent persons authorized to perform this duty. In the articles of association, besides the compulsory organs, optional organs may also be formed. The general assembly is a decision-making body in which all the partners participate. The manager is the body that manages and represents the limited company.
Managers are the bodies that represent and manage the company. In article 623 of the Turkish Commercial Code; “The management and representation of the company is regulated by the company contract. The management and representation of the company can be given to one or more partners holding the title of manager, or to all partners or third parties. At least one partner must have the right to manage and represent the company. If one of the directors of the company is a legal person, this person appoints a real person who will fulfill this duty on behalf of the legal person. Managers are authorized to take decisions and execute these decisions on all matters related to the management that are not left to the general assembly by law or by the articles of association.”
In order to become a manager, it is necessary to be written as a manager in the company contract or to be elected as a manager by the general assembly. The manager does not necessarily have to be a partner. An outsider can also be appointed as a manager. The general assembly is authorized for the appointment and dismissal of managers. A partner must be a manager. If there is more than one manager, a board of managers is formed. One person among the managers is elected by the general assembly as the chairman of the board of managers. The board of managers usually takes decisions while making decisions. If the votes are equal, the vote of the chairman is considered superior and that decision is taken.
The inalienable and untransferable powers of the managers are listed in the first paragraph of Article 625 of the Turkish Commercial Code.
These powers are; “The directors are in charge and authorized in all matters for which the laws and articles of association do not assign duties and powers to the general assembly. Managers cannot delegate or renounce the following duties and authorities:
- a) Senior management and management of the company and giving necessary instructions.
- b) Determination of the company management organization within the framework of the law and the company agreement.
- c) Establishing accounting, financial auditing and financial planning, if necessary for the management of the company.
- d) Supervision of the persons to whom some parts of the company management have been transferred, whether they act in accordance with the laws, articles of association, internal regulations and instructions.
- e) Establishment of a risk early detection and management committee, excluding small limited companies.
- f) Preparing the company’s financial statements, annual report and, if necessary, group financial statements and annual report.
- g) Preparing the general assembly meeting and executing the general assembly resolutions.
- h) If the company is in debt, notifying the court of the situation.
(2) In the articles of association, the manager or managers; It can be foreseen that they should present
- a) certain decisions they have taken
- b) individual problems to the approval of the general assembly.
The approval of the general assembly does not eliminate or limit the responsibility of the managers. The provisions of Articles 51 and 52 of the Turkish Code of Obligations are reserved.”
There is a contractual relationship between the limited company and the managers. This contract can be considered a service contract, a mandate contract or according to the doctrine, a sui generis contract. Managers under this contract have a duty of care and loyalty. In addition, there is noncompetition for managers. In article 626 of the Turkish Commercial Code; “Managers and people in charge of management are obliged to perform their duties with all due care and to observe the interests of the company within the framework of the rule of good faith. The provisions of Articles 202 to 205 are reserved. Unless otherwise stipulated in the articles of association or all other partners’ permission in writing, the managers cannot engage in any activity that creates competition with the company. The articles of association may stipulate the approval decision of the general assembly of the partners instead of the approval of the partners. Managers are also subject to the loyalty debt foreseen for the partners.” If there is a prohibition of competition, the manager cannot perform a transaction within the company’s activities or cannot be a partner or manager in another company operating in the same field. Managers must fulfill their duty of care and not harm the company. Legal liabilities arise as a result of causing damage to the company. According to the Supreme Court, first of all, a decision must be taken to file a lawsuit against the director at the general assembly. A lawsuit can then be filed. Making a decision in the general assembly is a condition of litigation.
As the company is responsible for the tortious act committed by the person authorized by the management and representation of the company while performing his duties regarding the company, the managers may be dismissed or their powers may be restricted. In article 630 of the Turkish Commercial Code; “The general assembly may dismiss the manager or managers, limit the management right and the authority to represent. Each partner, in the presence of justified reasons, may request the abolition or limitation of the management right and representation powers of the managers from the court. The manager’s gross violation of his duty of care and loyalty, his obligations arising from other laws and the company contract or losing the necessary ability for the good management of the company is considered a justifiable reason. The compensation rights of the dismissed manager are reserved.” Accordingly, if there are justifiable reasons, the general assembly and the partners may dismiss the manager or limit the right of management and representation. The concept of just cause is also explained in the law and it is stated that the manager has the right to compensation.
B) General Assembly
The general assembly is the legal body of the limited company with the widest powers due to its structure. In limited companies, the general assembly is the decision-making body of the company. It is formed when the shareholders or their representatives come together to negotiate and decide on the predetermined agenda upon duly call. This call is made by the directors or the minority at least fifteen days before the meeting day. Partners representing one tenth of the capital, which is considered as a minority, may request from the managers to be called to the general assembly meeting. The general assembly is divided into two as ordinary general assembly and extraordinary general assembly. Ordinary general assembly meeting is held at least once a year within three months following the end of the accounting year. Extraordinary general assembly meeting is held when extraordinary circumstances arise. The decisions made by the general assembly as a result of these meetings are legal transactions.
Some issues must be decided by the decision of the general assembly. The powers of the general assembly listed in the first paragraph of article 616 of the Turkish Commercial Code cannot be waived or transferred.
These powers in the law; “The inalienable powers of the general assembly are as follows:
- a) Amendment of the articles of association.
- b) Appointment and dismissal of managers.
- c) Appointment and dismissal of the group auditor and auditors.
- d) Approval of the Group’s year-end financial statements and annual report.
- e) Approving the year-end financial statements and annual activity report, deciding on the profit share, determining the profit shares.
- f) Determination of the remuneration of the managers and their release.
- g) Approval of the transfer of declared capital shares.
- h) Requesting the court to remove a partner from the company.
- ı) Authorization of the manager for the acquisition of the company’s own shares or approval of such an acquisition.
- i) Dissolution of the company.
- j) Making decisions on matters that the general assembly is authorized by law or articles of association or that the managers present to the general assembly.”
In the second paragraph of Article 616 of the Turkish Commercial Code, the inalienable powers of the general assembly, if specified in the articles of association, are as follows; “The following are the inalienable powers of the general assembly if they are stipulated in the articles of association:
- a) Approval of the activities of the managers and the cases where the approval of the general assembly is sought pursuant to the articles of association.
- b) Making a decision on the use of the right to be the subject of a proposal, preemption, redemption and purchase.
- c) Approval regarding the establishment of a pledge right on the declared capital shares.
- d) Issuing an internal directive on ancillary performance obligations.
- e) Granting the necessary permission for the approval of the directors and partners to engage in activities inconsistent with the obligation of loyalty to the company or the prohibition of competition, in the event that the shareholders’ approval is not sufficient pursuant to the fourth paragraph of Article 613 of the articles of association.
- f) Removal of a partner from the company due to the reasons stipulated in the articles of association”
Each partner has the right to vote while making the general assembly resolutions. Each partner must have at least one vote and each declared capital share must give at least one vote. How this right will be determined and implemented is stated in article 618 of the Turkish Commercial Code; “The voting rights of the shareholders are calculated according to the nominal value of their declared capital shares. Unless a higher amount is stipulated in the articles of association, every twenty-five Turkish Liras gives one voting right. However, the voting rights of shareholders with more than one share may be limited by the articles of association. The partner has at least one voting right. Written votes can also be cast if it is expressly arranged in the company contract. The articles of association may also determine the voting right in such a way that one voting right is deducted for each declared capital share, regardless of the nominal value. In this case, the nominal value of the smallest declared capital share cannot be less than one-tenth of the sum of the nominal values of the other declared capital shares.”
There are a number of situations in which the voting rights of the partners can be restricted. These cases are stated in article 619 of the Turkish Commercial Code; “Those who have participated in the management of the company in any way cannot vote on the decisions regarding the release of the managers. In the decisions regarding the acquisition of the company’s own declared capital share, the shareholder who has transferred the declared capital share cannot vote. The relevant partner cannot vote in the decisions that approve the partner’s activities contrary to the obligation of loyalty or the prohibition of competition.”
General assembly resolutions are divided into two as ordinary resolutions and important resolutions. Ordinary decisions are those that take place outside of contract changes and important decisions. The ordinary decisions of the general assembly are taken with the absolute majority of the votes represented at the meeting, unless otherwise stipulated in the law and the limited company agreement. Important decisions can be made in the presence of at least two-thirds of the votes represented and the absolute majority of the entire capital holding the right to vote. Important decisions are listed in article 621 of the Turkish Commercial Code;
- a) Changing the business subject of the company.
- b) Establishment of voting privileged declared capital shares.
- c) Limiting, prohibiting or facilitating the transfer of declared capital shares.
- d) Increasing the declared capital.
- e) Limitation or removal of the priority right.
- f) Changing the headquarters of the company.
- g) Approval by the general assembly for the directors and partners to act contrary to the obligation of loyalty or the prohibition of competition.
- h) Applying to the court to dismiss a partner from the company for justified reasons and expulsion of a partner from the company for the reason stipulated in the company contract.
- ı) Dissolution of the company”
It is an important decision to change the contract to include the reasons for the dismissal of a partner from the company later in the company contract. Because it is possible when all partners representing the capital of the company take a unanimous decision at the general assembly meeting.
The decisions taken by the general assembly of the limited company can be canceled by a court decision. An action for annulment can be filed against decisions that are contrary to the law, company contract or good faith. The partners must file this action for annulment within 3 months from the date of the decision. The court where the lawsuit should be filed is the commercial court of first instance in the place where the head office of the company is located. According to the Court of Cassation, the partner suing the annulment of the decision of the general assembly must remain in opposition to the decision by voting against the decision and record this circumstance in order to be able to request annulment on the grounds that it violates the law, the articles of association and the rules of goodwill. Only after that he can sue and this case can be accepted. Some decisions of the general assembly can be considered as null and void. For these decisions, a lawsuit for determination of nullity must be filed. The resolutions of the general assembly that will be counted as nulls are listed in article 447 of the Turkish Commercial Code;
“The general assembly, especially;
- a) Limiting or eliminating the inalienable rights of the shareholder to participate in the general assembly meeting, minimum votes, lawsuits and the law,
- b) Limiting the shareholder’s right to obtain information, examination and auditing to the extent permitted by law,
- c) Disrupting the basic structure of the joint stock company or its decisions which are contrary to the provisions of the protection of capital are void.”
VI. Partnership in Limited Company
In order to gain the title of partner, the person must have at least one declared capital share. The title of partnership can be acquired originally or by transfer. Acquisition is the first acquisition of the title of partnership by the persons who have made a commitment in establishment or capital increase. Acquisition of the transferee may occur as a result of the transfer of an existing share, share transfer, inheritance, property regime between spouses or execution. The limited company has a partnership structure of its own, the rights and obligations of the partners towards the company.
A) Partnership Structure
In limited companies, the number of partners can be at least one and at most fifty. Natural or legal persons can be partners. With the articles of association, it can be decided that the partners have certain qualifications. In order to be the founder or partner of a limited company, the person must have the capacity to act. It is not necessary to be a Turkish citizen for partnership, foreigners can also be the founder or partner of a limited company. Officers can be partners of a limited company.
In limited companies, a share ledger should be kept in which the information of the partners is written. In article 594 of the Turkish Commercial Code; “The company maintains a share ledger containing the declared capital shares. The names and addresses of the partners, the number of declared capital shares owned by each partner, the transfers and transitions of the declared capital shares, their nominal values, their groups and usufruct and pledge rights on the declared capital shares, the names and addresses of the owners are written in this share ledger. Share transfers should be recorded in the share ledger in case the owner of the shares changes in any way. In addition, if there is a lien, this is also recorded in the share ledger upon request.”
B) Rights and Obligations of Partners
The partner has obligations and rights to the company. Shareholders use their rights as a rule in terms of their participation in the capital. Partners’ rights are divided into financial rights and participation rights. Financial rights of the partner are dividend, liquidation share, withdrawal fund, preparatory period interest and priority right. Participation rights provide the limited company partner with management, control and supervision. Participation rights are right to participate in the general assembly, to speak and to make suggestions, to vote, to obtain information and to examine, to call the general assembly meeting and to request the addition of an item to the agenda, the right to sue for the nullity and cancellation of the general assembly resolutions, the right to withdraw, the right to demand the dissolution of the company.
Each partner has the right to receive a share of the profit to the extent of the capital share. The right to profit share is stated in article 608 of the Turkish Commercial Code; “Dividends can be distributed only from the net profit for the period and the reserves set aside for this. Dividend distribution can only be decided if the legal reserves required to be set aside in accordance with the law and the articles of association and the reserves stipulated in the articles of association are set aside. Unless otherwise stipulated by the articles of association, the profit share is calculated in proportion to the nominal value of the basic capital share; In addition, the amount of additional payment obligations fulfilled is added to the nominal value in the calculation of the profit share.” Payment of dividend is the most fundamental right of the partner. In one of its decisions, the Supreme Court considered non-payment of dividends in the last five-year period to be justified.
In article 614 of the Turkish Commercial Code; “Each partner can ask the directors to provide information about all the business and accounts of the company and can examine certain issues.” The right of the partner to obtain information and to examine is specified. The voting right of the partners is calculated according to the capital share in accordance with Article 618. Shareholders exercise their right to participate in the management by attending the general assembly and voting. They also have the right to sue in cases where the decisions are not in accordance with the law or contract. In case of liquidation of the company, they are entitled to receive liquidation shares in proportion to their capital shares.
In the limited company, the main debt of the partners is the payment of the committed capital. Partners do not lend to the company by paying their capital debts. Therefore, no interest can be paid on the basic capital and additional payments. Apart from fulfilling the capital debt, the partners may also be subject to additional payment or ancillary performance obligations if they are arranged separately in the articles of association. Additional payment is an obligation, subject to cash, that can be requested from the partners and returned if the conditions are met, in order to improve the financial structure, continue the company’s activities and meet the need for equity, provided that it is regulated in the articles of association.
Ancillary performance obligations are the obligations undertaken by the partners in order to ensure the realization of the subject of the business, apart from the capital debt. Failure to fulfill these obligations at all or incompletely or on time is a violation of the company agreement. Managers can file a lawsuit or initiate enforcement proceedings without judgment against the partner and ensure that they fulfill their obligations.
There are also obligations of the partners to comply with the obligation of loyalty and the noncompetition. The obligation of loyalty states that they must keep company secrets and cannot act to harm the company’s interests. It is forbidden for partners to use company secrets in a way that harms the company. The prohibition of competition is in question for managers in the law. However, this obligation can be expanded with the company agreement.
C) Assignment of Share
Partners can transfer their shares. However, the transfer of shares may be prohibited by the articles of association. In order for the declared capital share to be transferred, the general assembly of the shareholders must approve the transfer.
In article 595 of the Turkish Commercial Code; “The transfer of the main capital share and the transactions that result in the transfer debt are made in written form and the signatures of the parties are notarized. In addition, additional payment and side performance obligations in the transfer agreement; If the prohibition of competition is aggravated or extended to cover all partners, this issue is also stated in terms of being the subject of a proposal, preemption, repurchase and purchase rights and contract penalties. Unless otherwise stipulated in the articles of association, the approval of the general assembly of the shareholders is required for the transfer of the basic capital share. The transfer becomes effective with this confirmation. Unless otherwise stipulated in the articles of association, the partners may reject the approval of the general assembly without giving any reason. The transfer of capital shares may be prohibited by the articles of association. If the company contract prohibits the transfer or the general assembly refuses to give approval, the right of the partner to leave the company for just cause is reserved. If additional payment or ancillary performance obligations are stipulated in the articles of association, the general assembly may reject the approval, even if there is no provision in the articles of association, if the security requested from the transferee is not given because its solvency is considered doubtful. If the general assembly does not reject it within three months from the application, it is deemed to have given its approval.” The person who takes over the share must be registered and announced in the trade registry. The director of the company must make this application within 30 days, if he does not, the company will be fined.
Partnership share can also be transferred as a result of inheritance, property regime or execution. In these cases, in the first paragraph of Article 596 of the Turkish Commercial Code; “In cases where the main capital share is transferred by inheritance, provisions regarding the property regime between spouses or through execution, all rights and debts pass to the person who acquires the declared capital share without the need for the approval of the general assembly.” In this case, the general assembly may reject the transfer of the share within 3 months. In the second paragraph of the same article; “The company may refuse to approve the person to whom the basic capital share has passed within three months from the learning of the acquisition. For this, the company must propose to the person to whom the share is transferred, to take over the shares, on the account of itself or its partner or a third party shown by it, at its actual value.” If the company refuses, it has to pay the price to the person. According to Article 597, if the actual value cannot be agreed upon, the commercial court of first instance in the place where the company headquarters is located determines the actual value.
D) Leaving and Dismissal from the Company (Partnership)
The title of partnership ends as a result of share transfer, legal transfer, redemption of the share, dissolution of the company, leave and expulsion of the partners from the company. Since the parties that make the contract of their own will have the freedom to terminate the contract by mutual agreement, in some cases, it may be necessary to terminate the legal relationship for the benefit of the partner and in some cases for the benefit of the company. Leaving the company is when a partner voluntarily terminates the partnership relationship with a unilateral declaration of intent to the partnership. The partner can leave the company in three ways: the right to leave the partner with the articles of association, the right to leave with a court decision in the presence of a just cause, and the leave through participation in the leave. In article 638 of the Turkish Commercial Code; “The articles of association may grant the partners the right to leave the company, and may bind the exercise of this right to certain conditions. Each partner can file a lawsuit to decide to leave the company in the presence of justifiable reasons. The court may, upon request, decide to freeze some or all of the plaintiff’s rights and debts arising from the partnership, or to take other measures to secure the plaintiff partner’s situation during the lawsuit.” According to this article, the partner’s leave from the company may be subject to certain conditions through the articles of association.
The exercise of the right to leave based on the reasons stipulated in the articles of association is made with a unilateral declaration of will of the partner who wishes to leave. The validity of the notification is not dependent on the acceptance of the partnership. In order for the statement to be valid, it must be in good faith and in accordance with the rules of honesty. Managers, who receive the notice of resignation, examine whether the contractual reasons for leaving are realized and whether the right to leave is used in accordance with the contractual conditions. If the leaving notice is considered to be invalid by the company, a determination lawsuit must be filed to determine the invalidity of the leaving notice.
The right to leave for just cause is used if the continuation of the legal relationship has become unbearable for the partner, and if he cannot be expected to continue this relationship, according to the honesty rule in Article 2 of the Turkish Civil Code. In limited companies, each partner who thinks that there is a just cause can file a lawsuit to leave with just cause. The right to leave for just cause cannot be removed or limited by the partnership agreement. The Supreme Court considered the non-application of the principle of equal treatment to partners as a just cause. According to the Supreme Court, it is also justified for the director to cause damage to the company and to initiate an investigation for abuse of trust. However, according to the Supreme Court, in cases where a action against the managers can be filed, a lawsuit cannot be filed directly for just cause. The Supreme Court decided that the company’s mismanagement, constant borrowing and inability to pay its debts are also grounds for justifiable termination.
Other partners have the right to participate in leaving. If one of the partners wants to leave based on the articles of association or files a lawsuit for just cause, the other partners should be informed about this leave and they have the right to participate in leaving. In article 639 of the Turkish Commercial Code; “If one of the partners wants to leave based on the provision in the articles of association or files a lawsuit for justifiable reasons, the manager or managers inform the other partners without delay. Each of the other partners, within one month from the date of receiving the news;
- a) If the rightful reason stipulated in the articles of association is valid for him as well, he has the right to inform the managers that he will also participate in leaving,
- b) To participate in the lawsuit to leave due to justified reasons with a lawsuit he will file.”
The company can remove a partner for just cause, if the reasons in the articles of association are realized, in case of bankruptcy of the partner or lien on his share. This situation is stated in article 640 of the Turkish Commercial Code; “The reasons for expulsion of a partner from the company by the decision of the general assembly may be stipulated in the articles of association. Against the decision to remove, the partner may file an action for annulment within three months from the notification of the decision through the notary public. It is reserved if the partner is dismissed from the company based on a just cause, upon the request of the company, with a court decision.” The general assembly will decide to remove it. If the continuation of the legal relationship for the company has become unbearable for him, if he cannot be expected to continue this relationship, there will be a just cause and the court will be asked to remove the partner from the company. The removed partner can file an action for annulment within three months. If the partner files an action for annulment, the decision to remove will be suspended until the court decides.
A retirement fund is given to the person who leaves or is dismissed from the company. All the exiting or participating partners should be treated equally in terms of the payment of the retirement fund in proportion to their own investments and declared capital shares. In article 641 of the Turkish Commercial Code; “If the partner leaves the company, he/she has the right to demand the withdrawal fund corresponding to the actual value of the basic capital share.”
VII. Termination and Liquidation of Limited Company
In the first paragraph of Article 636 of the Turkish Commercial Code, the cases of termination of the limited company are listed.
These cases are; “Limited company terminates in the following cases:
- a) With the realization of one of the reasons for termination stipulated in the articles of association.
- b) With the decision of the general assembly.
- c) With the opening of bankruptcy.
- d) In other cases of termination stipulated in the Law.”
The decision to terminate with the decision of the General Assembly can be taken with the presence of at least two-thirds of the votes represented and the absolute majority of the entire share capital, which has the right to vote, since it is an important decision. Although the court’s decision to bankrupt the limited company is one of the reasons for its termination, in order for the bankruptcy to terminate the company, the decision must be finalized, approved by the Supreme Court or the appeal period has passed. The bankruptcy of the company’s creditors or, in the event that the company is in debt, the managers must notify the situation to the court and request it. Termination cases are not limited to those listed here, as they are called other termination cases stipulated in the law. The termination of the limited company will also be in question in other provisions regarding the termination of the law.
In the second and third paragraphs of article 636 of the Turkish Commercial Code; “If one of the legally required bodies of the company does not exist for a long time or the general assembly cannot be convened, upon the request of one of the partners or the creditors of the company to dissolve the company, the commercial court of first instance in the place where the company headquarters is located determines a time period for the company to bring its situation into compliance with the Law by listening to the managers. If not corrected, he decides to dissolve the company. In the presence of justifiable reasons, each partner may request the dissolution of the company from the court. Instead of the request, the court may order the plaintiff partner to be paid the actual value of his share and dismiss the plaintiff partner from the company, or any other acceptable and appropriate solution to the situation. Other termination cases are also included in the article. These are cases of lack of bodies or termination with just cause.
An action for termination with just cause is a civil action. It is filed by the partners of the company in the commercial court of first instance in the place where the head office of the company is located. The Supreme Court granted the right to demand the dissolution of the company with just cause, only to the partner written in the company’s share ledger. According to the Supreme Court, the judge should not be content with only the statements of witnesses and parties during the examination, but should also have an expert review on the books and documents of the company and investigate whether a just cause has occurred.
The limited company partner can request the dissolution of the company from the court if there is a justifiable reason. If the judge decides that there is a just cause, and if it is economically and rationally more appropriate to keep the company alive, instead of the termination decision, the plaintiff partner may be dismissed from the company or another acceptable solution appropriate to the situation. The right to demand the dissolution of the company from the court is the indispensable right of the partner. The Supreme Court adopted the principle that termination is the last resort in the termination of limited companies with just cause. According to the Supreme Court, if there is another way to be applied, it should not be decided to terminate. In addition, in one of Supreme Court’s decisions, the fact that one of the partners prevents the other from entering the company and does not allow him to examine the company’s books is considered grounds for termination with just cause.
In article 637 of the Turkish Commercial Code; “If the termination is due to a reason other than bankruptcy and a court decision, the manager, if there is more than one manager, at least two managers shall register and announce it in the trade registry.” It is regulated that the termination must be registered by including the provision.
With the completion of the liquidation process, the title of the company is deleted from the trade registry where it is registered, and thus, the legal personality of the company that exists and acquires legal personality with the registration ends. In the fifth paragraph of article 636 of the Turkish Commercial Code; “Provisions regarding joint stock companies apply to the consequences of dissolution.” The liquidation of the limited company takes place in the same way as the liquidation of the joint stock company. The liquidation of the company with the realization of one of the reasons for termination should be registered and announced in the trade registry. Articles 533 to 548 of the Turkish Commercial Code regarding the dissolution and liquidation of a joint stock company are applied by analogy.
A limited company is a company established by partners, has a specific purpose, is based on capital and has legal personality. The most important aspect is that the responsibilities of the partners are limited and they are freed from responsibility by paying their capital debts. The most preferred reason for the limited company is that it can be established on the basis of limited and without the need for a large capital. In a limited company, the general assembly takes the decisions. Managers also undertake management and representation duties. The company contract is very important both in the establishment and administration and management of the company. In all matters other than the mandatory provisions of the law, it is necessary to act in accordance with the articles of association. The articles of association determine the rights, debts and responsibilities of both partners and managers. The company must be managed and represented in accordance with the law and mandatory provisions.
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